Theory and Practice of Timeline Simulation
By Rodney E. Kreps
Abstract
A timeline formulation of simulation is where events happen
one at a time at definite times, and therefore in a definite time order. Simulation in a timeline formulation is presented in theory and practice. It is shown that all the usual simulation results can be obtained and many new forms can be expressed simply. It is argued that this procedure is more intuitive, physically more real, and technically more correct than the collective risk model.
An
available companion spreadsheet is a complete simulation model which can be indefinitely extended. In it, many working examples are given and are referenced in this paper.
KEYWORDS: Simulation, dynamic risk modeling, reinsurance